Starting your own law firm is exhilarating. You've passed the bar, maybe worked at another firm for a few years, and now you're ready to hang your own shingle. But here's the thing most new attorneys don't realize until it's too late: your insurance needs change dramatically the moment you become a business owner. What worked when you were an associate won't protect you now.
This guide walks you through exactly what insurance you need on day one, when to add additional coverages as you grow, and the costly mistakes that trip up even experienced attorneys when they go solo.
Day One: The Non-Negotiable Coverage
Before you accept your first client, you need professional liability insurance—also called legal malpractice insurance. While only Oregon, Idaho, and a few other jurisdictions legally require it, proceeding without coverage is financial suicide. A single malpractice claim can easily exceed $100,000, and even if you successfully defend yourself, legal fees alone can bankrupt a new practice.
For new attorneys with no prior claims, expect to pay between $2,500 and $5,000 annually for professional liability coverage with standard limits of $1 million per claim and $3 million aggregate. Your actual cost depends heavily on your practice area—real estate, personal injury plaintiffs, and estate planning are considered higher risk and command higher premiums. Corporate law and contract work typically cost less to insure.
Here's what catches new firm owners off guard: the retroactive date on your policy. This date determines how far back in time you're covered for work you performed. If you worked at another firm before going solo, you want your retro date to extend back to when you first started practicing law, not just when you opened your firm. Otherwise, any issues arising from your previous work won't be covered. This is especially critical if your former firm dissolves or stops carrying coverage—you could be completely exposed without tail coverage.
The Coverage Most Attorneys Skip (And Regret)
Cyber liability insurance is where most new law firms drop the ball. You might think, "I'm just a small solo practice—why would hackers target me?" But law firms are attractive targets precisely because you hold confidential client information, trust account details, and sensitive case files. In 2026, cyber incidents rank as the top global business risk, ahead of even AI-related threats.
Here's the kicker: your general liability policy explicitly excludes digital incidents. If ransomware locks your files, if a phishing attack compromises client data, if an employee accidentally emails privileged documents to the wrong person—none of that is covered under traditional policies. Cyber liability insurance covers the forensic investigation, client notification costs, credit monitoring services, regulatory fines, legal fees from resulting lawsuits, and even ransomware payments if necessary.
The good news? Adding cyber coverage is relatively affordable, especially if you bundle it with your other policies. Many carriers offer package deals that include professional liability, cyber coverage, and general liability at a 12-20% discount compared to buying separate policies. For most solo and small firms, comprehensive cyber coverage runs around $100-200 monthly.
General Liability and Property Coverage
General liability insurance covers the basics: if a client trips over your office rug and breaks their ankle, if you accidentally damage property while visiting a client, if someone claims your advertising defamed them. Think of it as the safety net for physical world problems, while professional liability handles your legal work and cyber liability handles digital threats.
If you're leasing office space, your landlord almost certainly requires proof of general liability coverage before you sign the lease. If you're working from home initially, you still need it—your homeowner's policy won't cover business activities. A Business Owner's Policy (BOP) bundles general liability with commercial property insurance and typically costs less than buying them separately. This makes sense once you have office furniture, computers, law books, and other business property to protect.
Growth Triggers: When to Add More Coverage
Your first hire is a major insurance milestone. The moment you bring on employees—whether associates, paralegals, or administrative staff—you need workers' compensation insurance. This is legally required in nearly every state and covers medical expenses and lost wages if an employee gets injured on the job. Skipping it exposes you to massive personal liability and potential criminal penalties.
Employment practices liability insurance (EPLI) becomes critical once you have employees too. This covers claims of discrimination, wrongful termination, harassment, or retaliation. Even if you're a good employer with the best intentions, a disgruntled employee can file a claim that costs tens of thousands to defend.
As your firm grows and takes on higher-value cases or clients, reassess your professional liability limits. The standard $1 million per claim might have seemed adequate when you were handling small matters, but if you're now representing clients in $5 million transactions or cases, you need proportionate coverage. Many successful attorneys carry $2-5 million in professional liability coverage once their practice matures.
Common Mistakes That Cost Attorneys Dearly
The biggest mistake is assuming you're covered when you're not. If you do contract work for another firm, don't assume their policy covers you—examine the definition of "named insured" in their policy. If you're licensed in multiple states or practice areas, verify your policy covers all your professional activities. Some policies exclude certain practice areas or work done under different licenses.
Another critical error is failing to report potential claims promptly. Most malpractice policies require you to report any circumstance that could reasonably lead to a claim, even if no lawsuit has been filed yet. Missing this reporting window can result in complete denial of coverage when you need it most. If a client is unhappy, threatening to sue, or if you discover an error in your work, report it to your carrier immediately.
Finally, too many attorneys buy insurance from the first carrier they find without comparing options. Shop with at least three carriers. Compare not just price, but coverage limits (both per-claim and aggregate), deductibles, what's excluded, whether you get "tail coverage" if you cancel, and how the carrier handles claims. Some carriers are known for fighting hard to defend attorneys; others settle quickly. These differences matter enormously when you're facing a claim.
Getting Started: Your Action Plan
Start by requesting quotes from at least three professional liability carriers authorized in your state. The American Bar Association maintains resources including a checklist for purchasers of professional liability insurance that walks you through exactly what to ask. Be honest about your practice areas, any prior claims or bar complaints, and where you've practiced before—misrepresentations can void your coverage entirely.
Once you have professional liability lined up, add cyber liability and general liability coverage, preferably through a bundled package to maximize savings. If you're hiring employees, add workers' compensation before day one of their employment. Set calendar reminders to review your coverage annually—as your practice evolves, your insurance needs will too.
Insurance isn't the exciting part of starting your law firm, but it's absolutely foundational. The right coverage protects not just your business, but your personal assets, your professional reputation, and your ability to sleep at night. Get it right from the beginning, and you can focus on what you actually love: practicing law and building your firm.
